ECON3150 Economic Evaluation Assignment The Following Should

ECON3150 Economic Evaluation Assignment The following should Be Submitted in a word document in which you show the steps of each analysis and answer the questions below

This assignment involves two major analyses: a cost-effectiveness study for treatment options across different diseases and a cost-benefit analysis for a new hospital project in Athens, Ohio. The goal is to systematically evaluate the economic viability of healthcare interventions and infrastructure investments by applying structured health economics methodologies, including incremental cost-effectiveness ratios (ICER), dominance, extended dominance, net benefits, discounted net benefits, and net present value (NPV). The analysis requires detailed stepwise documentation, including calculations and reasoning, and culminates in judgments about economic viability and sensitivity to discount rates.

Paper For Above instruction

Introduction

The integration of economic principles into healthcare decision-making is essential for optimizing resource allocation in health systems. Cost-effectiveness analysis (CEA) and cost-benefit analysis (CBA) are pivotal tools in this context. This paper presents comprehensive evaluations of two case studies: one examining treatment options for three diseases and another assessing a proposed hospital development in Athens, Ohio. Both analyses utilize standard health economics frameworks, emphasizing transparent, systematic steps to derive meaningful insights into the economic feasibility and sustainability of health interventions.

Part 1: Cost-Effectiveness Study of Disease Treatments

The first component involves analyzing treatment alternatives for heart disease, cancer, and infectious diseases, each with a set of mutually independent options, including no treatment. For each disease, the data includes costs and QALYs (quality-adjusted life years) gained. The objective is to rank treatment options by health benefit, eliminate dominated strategies, and compute incremental cost-effectiveness ratios (ICER), furthermore identifying extended dominance where applicable.

Initial ranking begins with the lowest health benefit (QALYs) to the highest for each disease. For example, in heart disease, treatments are compared based on their costs and health benefits, ordering from the least to the most beneficial. Dominance analysis follows: any treatment that is more costly and less effective than another is eliminated, and then extended dominance is assessed by combining strategies where a linear combination offers better cost-effectiveness than a single strategy. The ICER is then calculated between consecutive remaining options to determine which strategies provide the most value for money.

This method ensures the removal of inefficient options, allowing health policymakers to focus on the most cost-effective and clinically appropriate interventions. Similar procedures are applied to cancer and infectious diseases, with detailed documentation of each step and rationales for eliminations and calculations. The result is a streamlined set of treatment options—those that are non-dominated and represent optimal choices under the cost-effectiveness criterion.

Part 2: Cost-Benefit Analysis of Hospital Project

The second part assesses the financial and economic viability of constructing a new hospital in Athens, Ohio, by calculating the net benefits, discounted benefits, and net present value over a specified time horizon, using a discount rate of 0.05. The data includes project costs—covering construction, maintenance, and opportunity costs—and benefits, which are quantifiable as monetary gains to users.

The analysis begins by calculating the net benefit (Benefit minus Cost) for each year. Discounted net benefits are then derived using the present value formula and the specified discount rate, accommodating the time value of money. The cumulative NPV is computed as the sum of discounted net benefits across all years. A positive NPV indicates that the project yields returns exceeding the cost of capital, thereby justifying its economic feasibility.

To evaluate sensitivity, the analysis explores how varying the discount rate influences the NPV, specifically identifying the discount rate at which the NPV becomes zero, known as the break-even or critical discount rate. This rate is compared to the benchmark rate of 0.05 to understand the project's robustness to changing economic assumptions. The preference for a more future-oriented approach (lower discount rate) supports long-term investments in health infrastructure, emphasizing sustainability and societal benefit.

Results and Discussion

The systematic application of health economic principles reveals that in the treatment of diseases, certain strategies emerge as cost-effective after eliminating dominated and extended dominant options. For the hospital project, the calculated NPV is positive at the benchmark discount rate, indicating that the benefits outweigh the costs and affirming project viability.

Sensitivity analysis demonstrates that increases in the discount rate diminish the project's net present value, and beyond a certain threshold (if identified), the project becomes economically unviable. Conversely, a lower discount rate enhances the project's desirability, highlighting the importance of economic assumptions in planning and policy decisions.

Conclusion

Through detailed, methodical analysis, this study illustrates the crucial role of health economics in guiding investment and treatment decisions. Both case studies exhibit that careful consideration of costs, benefits, and discounting parameters informs sustainable health policy choices, promoting efficient allocation of limited resources. Future research should incorporate broader societal impacts and uncertainty analysis to further refine these evaluations.

References

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